Business News

Photo: European Commission

Regional Development Ministry says system of drawing EU funds is fixed; external debt grew by 33.7 billion in first quarter; household indebtedness grew by 3.6 billion from April to May; Nečas says impacts of EU summit measures will be limited; Czech National Bank cuts interest rates by quarter percent.

Regional Development Ministry says system of drawing EU funds is fixed

Photo: European Commission
The Czech Republic has corrected the system of drawing money from EU funds and will send the proposed changes to Brussels, the Regional Development Ministry has said. Earlier this year the European Commission suspended the payment of subsidies due to faults in programmes and it will be up to the EC to decide when the payment of subsidies will be renewed. If the EC does not renew the payments by the end of this year, the Czech Republic could lose tens of billions of crowns from EU funds. A ministry spokeswoman told the Czech Press Agency on Friday that they believe that by making the changes to the system the shortcomings in question will be removed and payments will be renewed, but it cannot be ruled out that the EC will ask for additional information or that its officials will make a mission to check the situation.

External debt grew by 33.7 billion in first quarter

Photo: archive of Radio Prague
The Czech Republic's external debt grew by 33.7 billion to nearly two trillion in the first quarter of 2012, amounting to just under 50% of the gross domestic product. According to the Czech National Bank the growth was pulled primarily by changes in government and banking sector positions. Year-on-year the external debt increased by 192.1 billion. External liabilities with an original maturity of more than one year accounted for 71% of all liabilities. The central bank says the rise in the external debt of the government sector was due to issues of long-term government bonds on foreign markets. The corporate sector's debt accounted for 27.4% of the Czech Republic's total external debt.

Household indebtedness grew by 3.6 billion from April to May

Photo: Štěpánka Budková
Meanwhile, the Czech households’ indebtedness to banks and financial institutions grew by 3.6 billion from April to May and by more than 54 billion year-on-year in May, reaching 1.128 trillion. Debts of companies rose by almost 34 billion year-on-year to 963.3 billion in May, and more than nine billion higher than in April. One-day household deposits at banks and financial institutions posted an 869 million rise between those months, with a year-on-year increase of nearly 74 billion. Household deposits redeemable at notice, including time deposits, dropped by 10.4 billion year-on-year to 331.9 billion in May. The central bank makes public the statistics as part of its monthly monetary survey, based on balances of financial institutions that include the central bank, commercial banks, branches of foreign banks, money-market funds and credit unions.

Nečas says impacts of EU summit measures will be limited

Petr Nečas,  photo: CTK
Prime Minister Petr Nečas told journalists on Friday that the impacts of the economic growth and jobs creation measures agreed upon by European Union leaders at Thursday’s summit in Brussels, will be limited. Without specifying an amount, he said the Czech Republic could also receive part of the money earmarked for the measures. The support may go to small and medium-sized companies which could receive funding in the form of loans from the European Investment Bank. EU leaders have agreed they will raise the investment bank’s capital by 10 billion euros, which will enable the bank to grant loans worth up to 60 billion euros, for example for support of innovation. The measures are part of a "growth pact" that has not yet been approved by the summit as a whole.

Czech National Bank cuts interest rates by quarter percent

Czech National Bank,  photo: Štěpánka Budková
The board of the Czech National Bank cut interest rates by a quarter of a percentage point this week, bringing the the benchmark two-week repo rate to an all-time low of 0.5%. The main interest rate has been at 0.75% since May 2010. Four members voted in favour of the rate cut, while three voted to keep rates unchanged. Interest rates in the Czech Republic are among the lowest in the region. The basic rate of the European Central Bank, which applies to all eurozone member countries, is 1%. Analysts believe the rates should stay at record-low levels at least until the end of 2012 before increasing.